FCoin, a brand new crypto exchange emerged just in 3 months’ time, has become one of the biggest crypto exchanges in terms of trade volumes. Their trade volume exceeded 28 billion RMB on June, 13th, how big is that? It’s bigger than the sum of trade volumes from second to seventh exchanges, including Binance, OKEx, Huobi and other big names.
And its token, FCoin Token (FT), has also surged from 0.1 RMB in the end of May to almost 8 RMB on June 13th. Then it continues to go down and right now the price stays at around 1.6 RMB (0.24 USD). Why FCoin, an emerging exchange, can rise in such an impressive speed? Despite of the roller-coaster situation of FT price, it would still be very interesting to know more about its models.
FCoin features – transparent, autonomous, efficient and safe
FCoin claims to be the first real-time, open and transparent trading community in the world. They think exchanges like OKEx are highly centralized organizations where individual investors are actually exposed to potential financial risks. Previous crypto exchanges are centered and have little to do with blockchain.
Usually, if you want to implement blockchain features into exchange systems, you would choose to be a decentralized one. But FCoin chose to build a real-time asset and trading data query mechanism and make it open to users.
In a sense, it is also a way to leverage blockchain, using distributed ledger to record data and open it for everyone to make sure the authentication of each trade.
FCoin said it will not have CEOs or board of directors. It will set an autonomous community-based trading platform. To do so, FCoin rewards the community with 51% of its issued FTs through the “Trans-Fee Mining” model.
And in the meantime, it will distribute 80% of its revenue (mainly trade fees) to all FT holders. All FT holders are members of its community and have the right to vote for governance rules through smart contracts.
This I believe is the key to FCoin’s fast success. It told users that “trading equals mining”, and therefore, they more you trade, the more you FT you will earn. With proper design, it can be a huge incentive for users.
Efficient and safe
By implementing technologies used in stock market systems, FCoin can process 2 million transactions per second.
Fcoin has also introduced security designs including multi-signature, offline signature and multi-layer architectures.
As I mentioned above, the key to FCoin’s fast success lies in its incentive strategy. There are actually two incentives here:
First, trading is mining. When users make a trade, he will be charged with a certain amount of transaction fees, usually in cryptos such as BTC, ETH, etc. This is just same as all other exchanges. What makes FCoin special is that they will return the transaction fees in full to users, in the form of FTs.
So, in terms of total assets, users did not lose anything when they make a transaction in FCoin, they have just bought a few FTs. Thus, free trade is delivered, in a sense.
Second, FCoin will distribute 80% of its revenue to all FT holders in the form of major cryptos such as BTC, ETH etc. The distribution composition will be determined by FCoin’s revenue stream. And each FT holder’s share will be in proportion to his FT holdings.
For example, if FCoin’s monthly revenue stream is composed of 100 BTC + 400 ETH, and a user possesses 1% of the platform’s total FT in circulation, he will receive 1BTC + 4 ETH as reward in this month.
The second incentive is actually quite normal among crypto exchanges. Forms such as reward ratios may vary differently, but the core idea is the same – Promoting platform tokens by rewarding transactions fees.
In FCoin’s case, the second incentive encourages users to possess FT, and the first incentive provides a way to obtain FT – trade, the more FT you want, more trade you will make. Even if they are made between your own accounts.
Is this model sustainable?
Theoretically, as long as there are trades made in FCoin, the model can be working forever. The key to expand scale is more about trade experience and asset security. FT incentives are more like a way to attract users’ attentions.
So, yes, it is sustainable if FCoin keep attracted users staying in the platform.
Zarc Gin is an analyst for Warp Speed Fintech, a Fintech, especially InsurTech-focused Venture Capital based in China.
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